Fund Times: 22 - 26 March

Henderson to overhaul New Star Technology fund
Henderson will change the name and investment policy of the New Star Technology fund to differentiate it from the existing Henderson Global Technology fund. The new name will be Henderson Global Innovation fund, and touted changes to its investment approach include less focus on the benchmark, and fewer stock holdings. The changes don’t represent a complete overhaul, but it does highlight the potential impacts to investors when fund groups merge and seek to rationalise product offerings. Investors may have selected this fund when New Star remained an independent fund house as little as two years ago, yet such a fund would typically have a long-term investment horizon of more than five years. In these types of situations, any investors who are unhappy with fund changes may incur transaction costs or opportunity costs on withdrawal, despite having made a long-term investment.

Fidelity CIO Nicky Richards to depart the group
Fidelity announced this week that CIO Nicky Richards will leave the company at the end of March, with Fidelity Europe CEO Robert Higginbotham stepping into the role until a replacement is appointed. Richards joined Fidelity in mid-2006, and our confidence in the team significantly increased under her stewardship. She implemented a number of changes, including restructuring the team along sector lines, whereas previously analysts were split between the UK and Europe resulting in duplication of work among the team. We also liked the fact that turnover in the analyst team was low under her tenure. Richards’ departure is disappointing, but having built up a solid team, the situation appears sound for the time being. Head of Research David Allen joined at approximately the same time as Richards, and his continued presence underpins this view. Any longer term impact will depend on who Fidelity appoints to replace Richards. 

L&G IM CEO Peter Chambers to retire
L&G Investment Management CEO Peter Chambers will step down at the end of September. Chambers plans to retire in September, and by that time will have completed almost five years in the role. L&G is yet to announce a replacement for Chambers.

Standard Life builds hedge fund business
Standard Life plans to acquire a 75.1% stake in alternative investments specialist Aida Capital and offer funds of hedge funds following the deal. Standard Life has a number of absolute return and alternative asset strategies, and they hope this acquisition will bolster their capabilities in this area. While absolute return funds can play a role in a diversified portfolio and some managers’ have displayed a talent in this area, the experience for a large proportion of investors historically have been poor. The question lingers how much have these decisions been motivated by playing on investors’ fears after the tumultuous market events over the last couple of years, and how well absolute return style funds will do in the long term.

Aberdeen plans to launch bond funds
Aberdeen Asset Management plans to launch a European high yield bond fund and an Asian bond fund over the coming months. They also plan to launch a UK mirror of their Luxembourg domiciled Emerging Market Bond fund. Aberdeen has a solid fixed income franchise, but given the fairly specific focus, UK investors should probably only be considering an investment in these markets for a niche proportion of their portfolio.

HSBC to launch MSCI Japan ETF
HSBC announced it will launch the HSBC MSCI Japan ETF on 24 March, continuing an increasing trend towards ETF and tracker fund launches in the UK. While this could increase competition in the ETF and index tracker market, we are somewhat concerned by the increasingly highly specialised nature of ETFs—many track exceedingly narrow slices of the market and we think investors have a hard time using such focused offerings well. This follows on from Vanguard’s expansion into Europe which we discussed here and a general trend towards lower fees in trackers and ETFs, examples of which we covered here. HSBC’s Japan offering may have a broader appeal though, as Japan typically makes up a proportion of many investors’ portfolios. The fund’s low TER of 0.40% p.a. also means that if managed effectively, it could be an attractive alternative to active funds, which on average have failed to keep up with Japanese index performance.

SWIP completes transfer of Insight funds
SWIP announced this week that the transfer of funds from Insight to SWIP which commenced in October 2009 has now been completed. SWIP stated that the transfer covered 300 funds, representing £50billion of assets. The transfer saw a massive increase in assets under management for SWIP, with the group quoting its new total assets under management at £142billion – an increase of well over 50%. Investors in SWIP funds should assess the impact on a fund-by-fund basis, as SWIP can digest the increase in assets more easily in some asset classes than others.

Morningstar qualitative ratings and reports issued this week
Morningstar issued new qualitative ratings and reports on a number of funds available to UK investors this week, including Rathbone Recovery and Investec Asia ex Japan. Click here to see the full list.